Applied Digital Stock Drops 30% After Earnings Miss; Announces Plan to Sell Cloud Computing Unit
Shares of Applied Digital (APLD), a Texas-based data center company, saw a steep 30% drop on Tuesday following the release of disappointing quarterly earnings results. The company, which has shifted focus from cryptocurrency mining to high-performance computing (HPC) and AI-driven data centers, reported lower-than-expected revenue for the quarter ending February 28, 2025.
Applied Digital posted a revenue of $52.9 million, marking a 22% year-over-year increase, but falling short of analysts’ expectations, which had projected $64.5 million. This miss of nearly 18% sent the company’s shares tumbling in early trading, reaching around $3.90 per share.
Despite the revenue shortfall, Applied Digital managed to report a non-GAAP net loss of $0.08 per share, slightly better than the anticipated $0.10 loss per share. However, its adjusted EBITDA came in at $10 million, missing analysts’ expectations by 41%, signaling continued pressure on profit margins due to heavy infrastructure investments.
A key factor in the underperformance was the company’s Cloud Services unit, which saw a significant 36% decline in revenue from the previous quarter. The unit’s revenue dropped from $27.7 million to $17.8 million, largely due to challenges in transitioning from single-tenant contracts to a multi-tenant, on-demand GPU model.
In response to these struggles, the company’s board of directors approved a plan to sell off its Cloud Services division entirely. The move is part of a broader strategy to refocus on its core HPC operations and potentially position the company as a real estate investment trust (REIT) in the future.
CEO Wes Cummins explained the decision, stating, “We believe separating the Cloud Services business from our data center operations better serves the long-term interests of our shareholders.”
This move marks a significant pivot as Applied Digital looks to streamline its operations and focus on areas with more potential for growth and profitability.
